1 Cash-Producing Stock with Competitive Advantages and 2 We Find Risky

Barchart·04/03/2026 05:50:17

A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.

Two Stocks to Sell:

Petco (WOOF)

Trailing 12-Month Free Cash Flow Margin: 3.1%

Historically known for its window displays of pets for sale or adoption, Petco (NASDAQ:WOOF) is a specialty retailer of pet food and supplies as well as a provider of services such as wellness checks and grooming.

Why Do We Pass on WOOF?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Earnings per share fell by 38.6% annually over the last three years while its revenue was flat, partly because it diluted shareholders
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

At $2.72 per share, Petco trades at 11.5x forward P/E. Dive into our free research report to see why there are better opportunities than WOOF.

Marcus & Millichap (MMI)

Trailing 12-Month Free Cash Flow Margin: 7.8%

Founded in 1971, Marcus & Millichap (NYSE:MMI) specializes in commercial real estate investment sales, financing, research, and advisory services.

Why Do We Steer Clear of MMI?

1. Sales trends were unexciting over the last five years as its 1% annual growth was below the typical consumer discretionary company
2. Poor free cash flow margin of 5% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Marcus & Millichap’s stock price of $26.30 implies a valuation ratio of 39.1x forward P/E. To fully understand why you should be careful with MMI, check out our full research report (it’s free).

One Stock to Watch:

Taboola (TBLA)

Trailing 12-Month Free Cash Flow Margin: 8.5%

Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ:TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.

Why Are We Fans of TBLA?

1. Annual revenue growth of 15.2% over the last two years was superb and indicates its market share increased during this cycle
2. Free cash flow margin increased by 7.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
3. Returns on capital are increasing as management’s prior bets are starting to bear fruit

Taboola is trading at $3.22 per share, or 5.3x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.

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